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Renegotiation of Concession Contracts in Latin America

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Abstract

We construct a regulation model in which renegotiation occurs due to the imperfect enforcement of concession contracts. This enables us to provide theoretical predictions for the impact, on the probability of renegotiation of a concession, of regulatory institutions, institutional features, economic shocks and of the characteristics of the concession contracts themselves. Then we use a data set of nearly 1000 concessions awarded in Latin America and the Caribbean countries from 1989 to 2000, covering the sectors of telecommunications, energy, transport and water, to test these predictions. Finally, we derive some policy implications of our theoretical and empirical work.

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  • J. Luis Guasch & Jean-Jacques Laffont & Stephane Straub, 2003. "Renegotiation of Concession Contracts in Latin America," ESE Discussion Papers 103, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:103
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    References listed on IDEAS

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    1. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-785, July.
    2. Cecile Aubert & Jean- Jacques Laffont, 2005. "Political renegotiation of regulatory contracts," Game Theory and Information 0506002, University Library of Munich, Germany.
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    6. Andrew Postlewaite, 2007. "Courts of Law and Unforeseen Contingencies," Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(3), pages 662-684, October.
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    8. George J. Stigler, 1974. "The Optimum Enforcement of Laws," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 55-67 National Bureau of Economic Research, Inc.
    9. Michael Klein, 1998. "Rebidding for Concessions," World Bank Other Operational Studies 11524, The World Bank.
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    13. Kikeri, Sunita & Nellis, John, 2002. "Privatization in competitive sectors : the record to date," Policy Research Working Paper Series 2860, The World Bank.
    14. J. Guasch & Jean-Jacques Laffont & Stéphane Straub, 2006. "Renegotiation of Concession Contracts: A Theoretical Approach," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(1), pages 55-73, September.
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    Keywords

    renegotiation; concession contracts; regulation; LDCs;

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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